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An irrelevance result with differentiated goods

Author

Listed:
  • Gareth Myles

    (Institute for Fiscal Studies and University of Exeter)

  • Hassan Khodavaisi

    (University of Urmia)

  • Nigar Hashimzade

    (University of Exeter)

Abstract

White (1996), Poyago-Theotoky (2001) and Myles (2002) prove that in the mixed oligopoly the optimal subsidy, equilibrium output level, all firms' profits and social welfare are identical irrespective of whether the public firm maximizes welfare or profit and moves simultaneously with private firms, or maximizes welfare and acts as a Stackelberg leader. They name this observation the `irrelevance result''. Previous results have assumed all firms produce a homogeneous product with quantity as the strategic variable. We show that the irrelevance result extends to product differentiation and to Bertrand competition with price as the strategic variable.

Suggested Citation

  • Gareth Myles & Hassan Khodavaisi & Nigar Hashimzade, 2007. "An irrelevance result with differentiated goods," Economics Bulletin, AccessEcon, vol. 8(2), pages 1-7.
    • Handle: RePEc:ebl:ecbull:eb-07h20001
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    File URL: http://www.accessecon.com/pubs/EB/2007/Volume8/EB-07H20001A.pdf
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    References listed on IDEAS

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    1. repec:ebl:ecbull:v:12:y:2002:i:1:p:1-6 is not listed on IDEAS
    2. White, Mark D., 1996. "Mixed oligopoly, privatization and subsidization," Economics Letters, Elsevier, vol. 53(2), pages 189-195, November.
    3. Gareth Myles, 2002. "Mixed oligopoly, subsidization and the order of firms' moves: an irrelevance result for the general case," Economics Bulletin, AccessEcon, vol. 12(1), pages 1-6.
    4. de Fraja, Giovanni & Delbono, Flavio, 1989. "Alternative Strategies of a Public Enterprise in Oligopoly," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 302-311, April.
    5. Joanna Poyago-Theotoky, 2001. "Mixed oligopoly, subsidization and the order of firms' moves: an irrelevance result," Economics Bulletin, AccessEcon, vol. 12(3), pages 1-5.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Kojun Hamada, 2018. "Privatization Neutrality Theorem: When a Public Firm Pursues General Objectives," The Japanese Economic Review, Japanese Economic Association, vol. 69(1), pages 59-68, March.
    2. Toshihiro Matsumura & Yoshihiro Tomaru, 2013. "Mixed duopoly, privatization, and subsidization with excess burden of taxation," Canadian Journal of Economics, Canadian Economics Association, vol. 46(2), pages 526-554, May.
    3. Matsumura, Toshihiro & Okumura, Yasunori, 2013. "Privatization neutrality theorem revisited," Economics Letters, Elsevier, vol. 118(2), pages 324-326.
    4. Lee, Sang-Ho & Muminov, Timur K. & Tomaru, Yoshihiro, 2017. "Partial Privatization And Subsidization In A Mixed Duopoly: R&D Versus Output Subsidies," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 58(2), pages 163-177, December.
    5. Amarjyoti Mahanta, 2022. "Price competition in a mixed duopoly with discontinuous marginal cost function," Economics Bulletin, AccessEcon, vol. 42(2), pages 330-341.
    6. Chen, Jiaqi & Lee, Sang-ho & Muminov, Timur K., 2019. "Time-inconsistent Output Subsidy/Tax Policies in Free-entry Mixed Markets," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 60(1), pages 61-77, June.
    7. Garcia, Arturo & Leal, Mariel & Lee, Sang-Ho, 2018. "A new irrelevance result in an endogenous timing with a consumer-friendly public firm," MPRA Paper 85648, University Library of Munich, Germany.
    8. Lin, Ming Hsin & Matsumura, Toshihiro, 2017. "Optimal Privatization and Uniform Subsidy Policies: A Synthesis," MPRA Paper 77285, University Library of Munich, Germany.
    9. Scrimitore, Marcella, 2014. "Quantity competition vs. price competition under optimal subsidy in a mixed oligopoly," Economic Modelling, Elsevier, vol. 42(C), pages 166-176.
    10. Xu, Lili & Lee, Sang-Ho & Wang, Leonard, 2017. "Strategic Trade and Privatization Policies in Bilateral Mixed Markets," MPRA Paper 80340, University Library of Munich, Germany.
    11. Marcella Scrimitore, 2012. "Quantity Competition vs. Price Competition under Optimal Subsidy in a Mixed Duopoly," EERI Research Paper Series EERI_RP_2012_15, Economics and Econometrics Research Institute (EERI), Brussels.
    12. Wang F.S., Leonard & Chen, Tai-Liang, 2011. "Privatization, Efficiency Gap, and Subsidization with Excess Taxation Burden," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 52(1), pages 55-68, June.

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    More about this item

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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